Equity rally tipped to continue

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The equity rally is set to continue driven by a pick up in global growth, according to the latest forecast.

Skandia Investment Group (SIG) says that its faith in equities remains amidst expectations they will climb higher as the economic recovery gathers pace.

With equities rising again in January, the group predicts that low interest rates and favourable valuations will lend further support in the coming months.

Although SIG admits it is increasingly likely that the Bank of England will now increase interest rates sometime this year, it points out they are almost certain to remain comparatively low by historical standards for some time yet.

Heightening the firm's expectations even further is the apparently diminishing risk of a European debt disaster.

"The data suggests that 2011 is going to be a good year for global growth, despite fiscal tightening in many places," said SIG chief investment officer James Millard.

"Successful bond auctions and improved economic data in Europe also raised hopes that the problems in some parts of Europe will remain contained.

"We remain overweight in equities and expect them to increase significantly in 2011.

"The key drivers of this rally that we noted last month remain in place: strong economic recovery leading to strong corporate earnings growth, low interest rates (even if they go up a little) and favourable valuations."

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